Generation X leads the nation in saving money, demonstrating a clear inverse relationship between age and essential expenses ratio. With an annual average savings potential of $27,200, Gen X far outpaces millennials and Gen Z, according to a new study by The Kaplan Group.
This suggests that individuals tend to manage their expenses more efficiently as they age, said the report. The trend of decreasing essential expense ratios with age is most favorable for the 55-64 age group, who have an essential expense ratio of 83.8%. Those under age 25 have a high essential expense ratio of 91.9% and are more likely to struggle to manage expenses effectively, said The Kaplan Group.
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“The 35-44 age group represents the average, showing a gradual improvement in financial management as they gain experience and stability,” said the report. “This progression underscores the importance of financial education and experience in achieving better financial outcomes over time.”
Gen Z’s savings potential is just slightly above $10,000 per year, while millennials posted a moderate savings potential of nearly $20,000. Baby boomers had annual potential savings just above $25,000, closely trailing Gen X.
The study also examined the impact of geography on savings potential and found that Mississippi residents have the highest savings potential of all states. A lower cost of living offers better potential for savings even though the median income is lower in Mississippi than in other states, the report said.
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States with a higher cost of living, such as California, tend to show the worst savings potential as residents grapple with high expenses that erode disposable income, said the report. Kansas represents a state with average savings potential thanks to a moderate cost of living and a reasonable median income.
The Kaplan Group said the findings highlight the importance of considering both income and living costs when evaluating savings potential.
The study calculated essential expenses ratios, savings scores and general savings potential based on 2022 consumer expenditure data from the Bureau of Labor Statistics. The state savings rankings were based on cost of living indexes, median income figures and the calculated essential expenses ratio.
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